Florida's Forgotten Victims Of Foreclosure: Tenants

He doesn't live in a McMansion in some suburban subdivision. He wasn't tricked into a mortgage he couldn't afford. In fact, he doesn't own a home at all. He's a tenant. But for the last five months and counting, Palacios, an unemployed construction worker, has lived in his Liberty City apartment without running water.

Deutsche Bank filed a foreclosure suit against the property's owners in April. As Palacios and his roommate suffered through illness and joblessness, they have slipped out to friends' houses to drink and bathe when they could, and did without when they couldn't.

On Tuesday, in a hearing that lasted less than nine minutes, Florida Eleventh Judicial Circuit Judge Gladys Perez ordered his water turned back on.

"Why are we here if we know the tenants are there?" she asked, a hint of irritation in her voice. Florida law prohibits landlords from simply cutting off utilities, a point which a lawyer for the apartment's owners, Joseph Dolsan and Jean Mervoir, did not dispute.

"Let's do it," Perez continued, "let's get the water back on."

Palacios's saga won't end there. Dolsan and Mervoir have vowed to evict him. But his hearing on Tuesday illustrates one of the hidden undercurrents of the foreclosure crisis: tenants, many who have little or no income, caught in the middle of battles between banks and property owners. The Census's American Community Survey estimates that 345,000 housing units in Miami-Dade County are renter-occupied -- 42 percent of the area's total. An unknown number of those units have been caught up in the area's housing crash.

Some 40 percent of the families nationwide facing eviction due to foreclosure are renters, according to National Low Income Housing Coalition estimates. Many of those foreclosures happen in low-income, non-white communities, where the tenants affected are the least likely to seek legal help or know their rights.

Federal law passed in 2009 creates some protections for tenants, but only once the properties they live in have been formally foreclosed upon. That a process that can often drag out over months.

Palacios's lawyer at Florida Legal Services, Purvi Shah, said she has handled about a dozen similar instances of landlords in foreclosure cutting off utilities in the past year. While statistics about the problem seem to be scarce, she estimates that foreclosure means "dozens if not hundreds of families are living without running water in South Florida."

By and large, she said, her clients live in duplexes, triplexes or other small multi-family residences. They are often properties that "investors purchased at the height of the bubble, thinking they were going to have a good investment property, or that they would be able to flip the property, then got caught in the crash."

"You've got landlords who are living in the middle of foreclosure," Shah said, "allowing their properties to run into the ground."

Foreclosures are often see as two-sided conflicts between banks and mortgagees, leaving tenants forgotten. Shah would like to see more responsibility for maintaining rental properties placed on lenders like Deutsche Bank, but for now there is little legal basis in Florida for actions like that.

Legislation passed in 2009 grants renters the right to stay in their properties for 90 days after a foreclosure has been finalized or throughout the term of their lease, whichever is longer.

"Before, banks always thought that we don't want to be landlords, and nobody can make us landlords," said Kent Qian, a staff attorney at the National Housing Law Project. Generally, he said, some banks don't see the value in collecting rent from only a few tenants when they have to go through the hassle of maintaining properties for them -- "but the federal law makes it clear."

"When you look back at all the federal requirements, who's been required to do what, I'd say that banks with regard to homeowner were required to do little" since the housing crash, said Linda Couch, the National Low Income Housing Coaltion's senior vice president for policy and research. "This is one area where Congress said wait a minute, we truly have a blameless victim here."

Since the foreclosure on his building is still dragging on, Palacio filed a lawsuit against Dolsan and Mervoir to keep the water running.Florida law mandates that tenants' utilities stay connected and residences remain habitable.

"There is no federal legislation that addresses that," said Qian. "So a lot of problems can happen during the foreclosure process, especially when the former landlord, who's not making their payments, skips out on all the other checks as well."

Even when tenants are able to make payments on utilities themselves, they are often confronted with a messy legal and logistical tangle of utility bills and inconsistent laws.

In many states it is difficult for tenants to take over utility payments when their landlords fail to uphold their obligations. Shah, Palacios's lawyer, said a recently passed ordinance should make it easier for Miami tenants to step in -- but that the high deposit fees required will make it difficult for many of her clients to pay up.

Shah would like to see the county step up its code enforcement. She would also like to see more cities and towns "look at this and see what's happening to our communities wholesale."

In the case of Palacios's residence -- a duplex on the county's property register that Shah claimed was illegally subdivided into three units -- everyone seems to agree that the property is languishing. Palacios is withholding his rent over the generally shabby upkeep of his home.

Marlie Condon, the landlords' lawyer, said she would be starting the eviction process almost at the same time as the water was restored.

"We have to," Condon said. "There's not supposed to be anyone in there now. There's problems with the building."

That response, Shah said, would be a "retaliatory eviction" -- which Shah said she'd fight it in court.

Speaking through a court interpreter on Tuesday, Palacios said he was pleased with his incremental victory. "Yes, yes, yes," he said, "very happy."